Budgeting Basics
FGFOA Budget Workshop
December 19, 2013
Todd Bond, Budget Officer
Polk County Board of County Commissioners
1
Course Outline
► Budget
background
► Budget
Process and Policy
► Budget
Types
► Budget
Methods
 What is a budget?
 What Guides the Budget?
 Funds and Balancing
 TRIM – What is it and how it impacts us
 Operating
 CIP Process




Line Item
Program Budgets
Zero Based
Budgeting for Outcomes
► Budget
Monitoring and Reporting
2
What is a Budget?
► The
Merriam-Webster dictionary definition:
 A statement of the financial position of an
administration for a definite period of time
based on estimates of expenditures during the
period and proposals for financing them
3
What is a Budget?
REVENUE
EXPENSE
Taxes
User Fees
License Fees
Permit Fees
Fund Balance
Bond Proceeds
Misc. Revenue
Position Costs
Operating Costs
Capital
Equipment
Capital Projects
Reserves
How much are
citizens willing
to pay?
What level of
service do
citizens want?
4
What is a Budget?
► Government
(GFOA)
Finance Officers Association
 Financial Plan - a plan of what is projected to
be received in revenue, as well as how much
will be spent over the same time
 Operations Guide – used as a tool by
organizations to guide operations, as well as
capital expenditures
 Policy Document – provides information on
goals, objectives, service levels, challenges,
trends, and policies
 Communications Device - communicates to
the Board and the public what is being done
with tax revenues
5
6
Orange County Sources of Funds
7
Pasco County Expenditures Chart
8
Polk Adopted Budgets
$400,000,000
$1,016,242,489
$1,260,445,237
$1,307,285,766
$1,332,812,964
$1,612,347,876
$1,335,672,994
$884,142,451
$873,278,602
$848,185,080
$600,000,000
$668,036,988
$800,000,000
$813,376,215
$1,000,000,000
$999,869,798
$1,200,000,000
$1,334,590,533
$1,400,000,000
$1,723,830,226
$1,600,000,000
$1,605,458,844
$1,800,000,000
$1,824,850,291
$2,000,000,000
$200,000,000
$0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
9
Putting the budget ahead of the
policy is the wrong way to do it. It's
too often the way it's done in
Washington.
Spencer Abraham
10
What Guides our Budget?
► Florida
Statutes
► Best Practices – GFOA
► Generally Accepted Accounting Principles
► Local Policies
 Ordinances, Resolutions, Charters
11
Florida Statutes
► There
are numerous Florida Statutes
 Chapter 129 County Annual Budget
►Establishes
guidelines for County Annual Budget
 FS 129.01 “Budget system established.”
 FS 129.03 “Preparation and adoption of budget.”
 FS 129.04 Sets the “Fiscal Year”.
 FS 166.241 for Municipality Budgets, Fiscal
Years, and Budget Amendments
12
Florida Statutes Continued
► Chapter
200 Determination of Millage
 FS 200.065 Method of Fixing Millage
►Sets
the timeline for establishing property taxes for
all local governments and other taxing authorities
 FS 200.011 Duty of County Commissioners and
School Board in setting rate of taxation
►Establishes
that the Commissioners determine the
amount to be raised for all County purposes for the
Board as well as other County taxing authorities
13
Florida Statutes Continued
► Budget
must be balanced
► Defines budget process
► Establishes budget amendment process
► Defines budget system
► Defines fiscal year
► Establishes that it is unlawful to overspend
the budget
14
Legal Requirements
► Budget
shall conform to the State’s uniform
chart of accounts
 Expenses are assigned to functional categories
►General
Government
►Public Safety
►Transportation
►Economic Environment
►Human Services
►Culture/Recreation
►Inter-fund Transfers
15
Basic Structure
► Fund
Types
 General Fund
►Only
fund that can be used across the Board for all
General County Purposes
 Special Revenue Funds
►Account
for proceeds of specific revenue sources
requiring separate accounting because of legal or
regulatory provisions or administrative action
 e.g. Transportation Trust Fund, Special Revenue Grants,
Fire Services Fund, etc…
16
Basic Structure (continued)
► Fund
Types (continued)
 Debt Service Funds
►Account
for the accumulation of resources for and
payment of the County’s long-term debt other than
those payable from the operations of Enterprise
Funds
 Capital Funds
►Account
for the acquisition or construction of major
capital facilities and the acquisition of
environmentally sensitive land
 e.g. CIP Road Projects Fund, Public Safety Capital
Improvement Fund
17
Basic Structure (continued)
► Fund
Types (continued)
 Enterprise Funds
►Used
to account for operations that are financed and
operated in a manner similar to private business
enterprises
 e.g. Solid Waste Funds, Utilities Funds, Rohr Home Fund
 Internal Service Funds
►Account
for the financing of goods and services
provided by one department or agency to other
departments or agencies, and to other governments
on a cost reimbursement basis
 e.g. Fleet Maintenance Fund, Fleet Replacement Fund,
Employee Health Insurance Fund, Information Technology 18
Generally Accepted Accounting
Principles (GAAP)
► Combination
of standards and simply the
commonly accepted ways of recording and
reporting accounting information
► Governmental Accounting Standards Board
(GASB)
 The source of GAAP used by State and Local
governments in the United States
19
Best Practices - GFOA
► GFOA
has established a collection of
practices that identify enhanced techniques
and effective strategies for state and local
government practitioners
► http://www.gfoa.org/index.php?option=com
_content&task=view&id=118&Itemid=130
20
Local Policies - County Charter
► Article
I: “Polk County shall be a Home Rule
Charter County, and except as may be limited by
this Home Rule Charter, shall have all powers of
self-government granted now or hereafter by the
Constitution and Laws of the State of Florida”
► Article II: “The Board of County Commissioners
shall have specific powers and duties to review the
budgetary requests including salaries and make
the final budgetary determinations and
appropriations for all County governmental
operations…”
21
Budget Process
Adoption
Phase
Review
Phase
Preparation
Phase
Planning
Phase
Budget & CIP Calendar
Training
Board Retreat
5 – 10 Year Projections
Budget Kickoff
Forms & Instructions
Work Sessions with County
Manager
TRIM
Proposed Budget
BoCC & Public
Review
Two Public Hearings
Adoption
22
TRIM Process
► Florida
Millage
Statute 200 – Determination of
 TRIM – stands for Truth in Millage
 Sets timeline for millage that drives the whole
budget calendar for local government
 The process that establishes property taxes
 All taxes are computed based upon taxable
value
►Taxable
value/1,000 x millage rate = property tax
23
TRIM Process
Local Government Statutory TRIM Timetable
Day #
1
Within 15
35
55
Between
65/80
Between
80/95
Between 2-5
Days After
Ads
“Typical” Date*
Agency
Property
Appraiser
Taxing
July 15
Authority
Taxing
August 4
Authority
Property
August 24
Appraiser
Taxing
September 3 - Sept. 18
Authority
Taxing
Sept. 18 - October 3
Authority
July 1
Sept. 20 - October 8
Activity
Certifies taxable value
Proposed Budget presented to Board
Advises Property Appraiser of proposed millage
Prepares Notice of Proposed Property Taxes (TRIM Notice)
Hold Tentative or First Public Hearing on the budget and
millage. (Noticed on TRIM)
Advertises for Final Public Hearing to adopt a budget and
millage rate.
Final or Second Public Hearing to adopt the budget and
Taxing
millage rates. Hearing CANNOT be held sooner than 2 days
Authority
nor later than 5 days after it is advertised in the newspaper.
24
Property Tax Calculation
► Example:




Assessed value:
$150,000
Less Homestead Exemption: ($50,000)
Taxable value:
$100,000
100,000/1,000 = 100 x 6.8665 = $686.65
25
Polk County Property Value
Countywide Final Taxable Value
5,000,000,000
24,085,122,530
23,239,869,878
24,451,094,450
26,084,682,789
30,428,480,693
23,764,413,952
18,995,694,016
17,992,919,298
16,833,884,271
14,508,615,368
10,000,000,000
14,227,251,790
15,000,000,000
15,494,182,505
20,000,000,000
20,635,756,850
25,000,000,000
34,461,594,334
30,000,000,000
30,275,942,171
35,000,000,000
35,609,473,400
40,000,000,000
0
98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
26
Polk County Millage
Countywide Property Tax Rate
7.7270
7.7270
7.7270
7.7270
7.7270
7.5000
7.9770
8.0000
7.9770
8.5000
8.3330
8.7270
9.0000
6.8665
6.8665
6.8665
6.8665
6.8665
6.8665
6.5000
6.8665
7.0000
6.0000
5.5000
5.0000
98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
27
Polk County Millage
FY 12/13
Adopted
FY 13/14
Proposed
Change
General Fund
5.6665
5.6665
-0-
Environmental Lands
0.2000
0.2000
-0-
Transportation
1.0000
1.0000
-0-
6.8665
6.8665
-0-
Parks MSTU
0.4219
0.4219
-0-
Libraries MSTU
0.2109
0.2109
-0-
-0-
0.1000
0.1000
0.6328
0.7328
0.1000
7.4993
7.5993
0.1000
Countywide
Countywide Total
Unincorporated
Stormwater MSTU
Unincorporated Total
Total Millage
28
Sonoma County California
29
Budget Types
► Operating
Budget
 One year
 Multiyear – recommended practice
► Capital
Budget
 Adopted as part of overall budget
 Developed separately as a “Capital
Improvement Plan” (CIP)
 First year is funded
30
Operating Budgets
► Personal
Services
 Salaries and benefits
► Operating
Expenditures
 Office supplies, fuel,
contracts, etc.
► Capital
GENERAL FUND
EXPENDITURES BY CHARACTER
FY13/14
Transfers-Internal
3.35%
Reserves
10.95%
Operating Expenses
13.57%
Capital Outlay
0.93%
Expenditures
 Equipment, vehicles, etc.
► Reserves
Other Non-Operating
0.08%
Personal Services
13.19%
Grants and Aid
3.93%
Constitutional Officers
*
54.00%
31
Multiyear Budget
► Second
year plan or “Rolling Plan”
 The first year is adopted and following years are
a tentative spending plan
 Budgets and Plans are re-done every year
► Two-Year
Budget
 2nd year plan is adjusted in the “off year” and
adopted
 Every other year becomes a one year budget
► TRIM
process is required every year
32
Benefits of Multiyear Budgeting
► Enables
strategic and tactical thinking
► Identifies trends
► Demonstrates the need for reserves
► Early problem identification
► Viewed favorably by bond rating agencies
33
Capital Improvement Plan Budgets
► Five
to twenty-year plan
 Includes funding sources and operating costs of
finished projects
 May also include Unfunded Projects
► Approved
through a separate process
► Adopted annually as a plan
► Included in adopted budget
34
Types of CIP Projects
► Roads
► Intersections
► Jails
► County
Facilities and Buildings
► Parks and Athletic Fields
► Drainage
► Landfills
► Water mains, pumps, and wells
35
Capital Improvement Plan
36
Polk County CIP Process
► Departments
and Divisions identify projects
► Divisions prepare “Carry forward” Update
(April - May)
► County Manager Reviews (June)
► Board Workshops (August)
► Approval During Public Hearings (September)
► “True Up” of Adopted Budget (December)
37
Budget Methods
► Line
Item Budget
 Focuses on items being bought or paid for
►Travel,
office supplies, fuel, etc.
 Keeps track of how much was spent on items
 Easy to develop, start with last year’s cost
 Also known as “Traditional Budgeting”
►Typically
built upon last year’s cost
 Emphasis is not placed on services provided
38
Budget Methods
Line Item Budget
Division: Fire Rescue
Program: Operations
Cost Center: 290522012
Description
Total Personnel Services
Operating Expenses
FY2014/15
Plan
22,300,919
Professional Services
15,000
Purchase Of Computer Software
10,000
Laundry and Dry Clean
0
Other Contractual Services
55,000
I.T.
15,271
Travel Out Of County
2,000
Travel In County
0
Communication Services
75,000
Utility Services
185,000
Rent Lease Equipment Building
20,000
Risk: Property Damage
2,500
Maintenance Building/Grounds (Misc. Facilities
300,000
Recurring)
39
“We can't solve
problems by using the
same kind of thinking
we used when we
created them.”
Albert Einstein
40
Budget Methods
► Program
Budgets
 Focuses on expected services and activities
►Performance
objectives are used
 Revenue and expense are linked to programs
that meet community goals
 Identifies anticipated results and outputs
41
Budget Methods
Program Budget
42
Budget Methods
► Zero
Based
 Asks managers to build a budget, starting from
zero
 All expenses must be justified for each new
budget
 Budgets are analyzed for its needs and costs
regardless of whether the budget is higher or
lower than the previous one
 Time-consuming and costly
43
Budget Methods
► Performance
Based
 Focus on results/outcomes, not inputs
 Shows relationship between program funding
levels and expected results
 Aids in assessing productivity, quantity, and
quality
 Multiple variations, such as “Budgeting for
Outcomes”
44
Budget Amendments
► Florida
Statute 129.06 “Execution and
Amendment of budget”
 Local authorities can approve or delegate
authority to approve amendments, if total
appropriations of the fund do not change.
 Use of Reserves has to be Board approved.
 Funds can be increased by resolution for
unanticipated revenue.
 Public Hearing required for any other purposes.
45
Budget Monitoring and Reporting
► Budget
vs. actual reports
 % spent compared to % of year completed
 Keep in mind normal/seasonal fluctuations
►Debt
service may be paid early in the year
►Park costs increase during league seasons
 Payroll schedules
Actual vs Budget Expense Summary
OCT-12 through JUN-13
75% through fiscal year
by division, all funds
Division
Pfdesc
Budget
Actual
Balances % Budget Used
Adult Day Health Care Centers
1,449,546
888,683
560,863
General Fund
1,371,546
859,991
511,555
78,000
28,692
49,308
2,894
2,064
830
Special Assessment Funds
2,894
2,064
830
Board of County Com m issioners
37,101,681
16,398,564
20,703,117
36,789,483
16,086,366
20,703,117
312,198
312,198
0
Special Revenue Grants
Assessm ent Projects
General Fund
General Capital Improvement Funds
Explanation
61.31%
62.70%
36.78%
71.32%
71.32%
44.20%
43.73%
100.00% Transfers processed.
46
Dashboards
47
Dashboards continued
48
49
Questions?
Thank You!
50